Shares of Bombardier (TSX:BBD.B) dropped seven per cent in late morning trading Thursday after the Montreal-based airplane and train maker beat analyst expectations, but reported weaker results, particularly in revenue.

The company's stock was down 33 cents to $4.42 on the Toronto Stock Exchange.

The drop came after Bombardier reported net income of US$214 million or 12 cents per share for the fourth quarter ended Dec. 31. That's down from $295 million or 16 cents per share a year earlier, in the comparable period that was a month longer, ending Jan. 31, 2011.

The results reflected a change in the reporting period for Bombardier's aerospace division, which shifted its year-end to Dec. 31 from Jan. 31, shortening the reported quarter by a month. The move brought the reporting period in line with Bombardier's transportation operations, which already report its year-end on Dec. 31.

In its outlook, Bombardier Aerospace said it expects to deliver 180 business aircraft and 55 commercial aircraft in 2012, and Desjardins analyst Benoit Poirier noted that he was disappointed with lower margins in the division, which are about five per cent, compared to his estimate of seven per cent.

"Each one per cent change in margin has a four-cent U.S. impact on EPS," Poirier said in a research note.

"The company has also withdrawn its long-term aerospace margin guidance of 10 per cent."

President and CEO Pierre Beaudoin told analysts he expects aerospace margins to improve as the year progresses.

"Our EBIT (earnings before interest and taxes) margin will be five per cent and it will be better in the second half of the year than it is in the first half of the year," Beaudoin said during a conference call.

"This is essentially the same guidance we gave last year. We expect significant cash flow from operations in order to fund our $2 billion in new programs and development."

National Bank Financial analyst Cameron Doerksen also said Bombardier's earnings per share were in line with expectations but also noted the margin outlook is "disappointing."

"The key disappointment in Bombardier's guidance is its 2012 Aerospace EBIT margin forecast of five per cent, which is well below our 6.5 per cent forecast and likely below most Street estimates," Doerksen wrote in a research note.

But he noted that last year Bombardier guided for a five per cent aerospace margin and ended up with 5.8 per cent.

For the year ended Dec. 31, Bombardier posted net earnings of $837 million or 47 cents per share, compared to $775 million or 42 cents per share in the previous year.

Annual revenues rose to $18.3 billion, compared to $17.9 billion for the year prior.

Bombardier's aerospace division had revenues of $8.6 billion for fiscal 2011, compared to $8.8 billion in 2010, while EBIT totalled $502 million, or 5.8 per cent of revenues, compared to $554 million, or 6.3 per cent.

Bombardier Aerospace's backlog increased to $22 billion as of Dec. 31, compared with $19.2 billion as of Jan. 31, 2011.

The transportation division had revenues that totalled $9.8 billion, compared with $9.1 billion last fiscal year. EBITB amounted to $700 million, or 7.2 per cent of revenues, compared to $651 million, or 7.2 per cent, last fiscal year.

Beaudoin said Bombardier will assemble the two first flight test vehicles, one for the Learjet 85 and the other for the C Series, a 100-to-149 seat narrow-bodied airplane.

"What we're giving to you is a target to fly at the end of the year," Beaudoin said.

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